A Bank Has a Positive Duration Gap

question 14

Multiple Choice

A bank has a positive duration gap. Which one of the following statements is most correct?

• A)If all interest rates are projected to increase,to limit a net value decline before rates rise,the bank should increase long-term loans and decrease short-term loans.
• B)If all interest rates are projected to decrease,to limit a net value decline before rates fall,the bank should increase long-term loans and decrease short-term loans.
• C)If all interest rates are projected to increase,to limit a net value decline before rates rise,the bank should increase short-term loans and decrease long-term loans.
• D)If all interest rates are projected to decrease,to limit a net value decline before rates fall,the bank should increase long-term bonds issued by the bank and decrease short-term bonds.
• E)None of the options are correct.

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